Market prediction platform Kalshi is facing a class-action lawsuit filed by traders who say the exchange should have paid market bets on whether Iran’s Supreme Leader Ali Khamenei would step down.
The controversial market attracted nearly $54 million in trading volume before it was suspended following reports of US and Israeli airstrikes on Iran.
According to a Bloomberg Law report, the complaint, filed in the U.S. District Court for the Central District of California, alleges that Kalshi market rules forced traders to pay up if Khamenei left office. The lawsuit alleges that the platform did not clearly disclose the “death case” until after reports of the strike began.
Traders claim that Kalshi allowed trading to continue on February 28 because reports of an attack on Iran encouraged him to accept additional “yes” conditions for Khamenei’s departure, despite knowing they would not pay.
The market asked traders to predict whether Khamenei would step down by specific dates. The language of the contract was “clear, unambiguous and binary” and promised full payment to “yes” positions if he left the role, the complaint said.
Kalshi CEO Tarek Mansoor responded to the controversy on social media, stating that the platform does not offer live prediction markets with a person’s death.
As criticism mounted, Mansour later said the company would reimburse traders for fees and net market-related losses and update how similar contracts disclose death-related exclusions.
“Though the rules were clear and we tried to emphasize them, traders claimed they were not well known,” Mansoor said in a March 1 message, adding that Kalshi would cover the loss from his own pocket.
The lawsuit was filed by traders Adam Risch and Jonathan Glicksman, who are represented by Novian & Novian LLP. The proposed class includes U.S. traders who took a “yes” position in the market on whether Khamenei would step down.
The plaintiffs are seeking damages, compensatory damages and injunctive relief requiring Kalshi to improve its disclosure practices. The complaint alleges breach of contract and violations of California law.
Market prediction platforms like Kalshi have recently attracted increased regulatory scrutiny in the United States, with several states arguing that event contracts offered by these platforms constitute gambling under state law.
